Interest rates predicted to plunge

Published: November 21, 2008 - 11:26 AM

Cheaper Home Loans on the Way

By Lesley Coombes

One of Australia’s biggest banks NAB has predicted interest rates to plunge to 3.75 per cent which could save near $300 a month on the average loan, the Herald Sun reported.

While this could be a sign that the Reserve Bank (RBA) is concerned about the global economy, it is also an opportunity for Australians to take advantage of the low interest rates and save.

NAB chief economist Alan Oster has tipped the RBA to lower rates by 0.75 percentage points next month.

“This will be followed by another cut of 50 basis points in February and a further 25 basis point reduction in March to take the cash rate to 3.75 per cent,” he said.

$287 a month will be slashed off the standard variable loan of $300,000 and $334 a month on 25-year standard variable loans of $350 000.

This expected drop is good news for homeowners and those looking to buy their first home. With the falling interest rates and cheaper fuel prices, perhaps it is a good time to take advantage of opportunities such as the first home buyers grant. Young people have been given an opportunity to enter the housing market and although there is a degree of uncertainty in the present economic climate, it is an offer to be seriously considered.

Many home owners and new home buyers are keen to keep their debt levels to a minimum. They may be tempted to carry their mortgages over a longer period to reduce their monthly payment but by doing so, end up paying much more for their home in the long term.

Also, with the current fall in interest rates, rather than reducing their mortgage payments home owners could maintain it at the higher level and pay it off quicker. By taking advantage of savings that could be achieved elsewhere, such as with electricity and gas, home owners could reduce their debt.

Shoparound.com.au provides home owners with an opportunity to save money on other essential living costs to have more available to pay the mortgage. Their free service makes it easy to look for electricity suppliers and cheap gas in Victoria and South Eastern NSW. Shoparound’s gas and electricity comparison table cuts out the middle man and takes the hard work out of gas and electricity price comparison. In these tough financial times, rather than compounding debt by extending the mortgage, homeowners can simply save on everyday household expenses.

« Back to article list